Data for Club Canada Wholesale Inc. are presented in P5-6A.

Instructions
(a) Calculate the profit margin and gross profit margin.
(b) The vice-president of marketing and director of human resources have proposed that the company change its compensation of the sales force to a commission basis rather than paying a fixed salary. Given the extra incentive, they expect net sales to increase by 15%. They estimate that gross profit will increase by $27,000, operating expenses by $13,500, and income tax expense by $2,700. Non-operating expense is not expected to change.
Calculate the expected new gross profit and profit amounts.
(c) Calculate the revised gross profit margin and profit margin, using the information you calculated in part (b). Comment on the effect that this plan would have on profitability and evaluate the merit of this proposal.

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CLUB CANADA WHOLESALE INC. Adjusted Trial Balance December 31, 2015 Debit Credit Notes receivable Merchandise inventory Equipmehntation-buildings197000 revenue Mortgage payable Retained earnings Sales returns and allowances Cost of goods sold 922,360 Administrative expenses $1,365,960 $1,365,960